The Power of Belief in Your Trading

In September 1947, Reader’s Digest published the following quote by Henry Ford; “Whether you think you can or you can’t, either way you are right.” This quote has become quite famous as it describes the essence of beliefs and how they impact every aspect of our lives. From health, to relationships, to business and finance, how you think fundamentally directs all that you do.

Of course, it follows that beliefs greatly affect your trading as well. Beliefs are simply thoughts that you accept as truth. You view them as non-negotiable, especially when they concern you; such as, beliefs about your worthiness, intelligence, attractiveness and/or your abilities – or lack thereof. You begin to form beliefs as soon as you begin to experience; and as you interpret experiences (emotionally, at first, and later around 5 or 6 years old, cognitively) you form the foundations of beliefs. They become the lenses through which you see the world; also known as programing and conditioning because these interpretive foundations are strengthened by repetition and often bear little resemblance to reality – as in limiting beliefs.

Limiting beliefs are irrational and negative beliefs that usually don’t coincide with facts, but you still hold on to them with an iron grip even though these learned limitations are mostly unconscious. They represent core beliefs, and the earlier they are formed the stronger they become. These internal structures develop the building blocks of your relationship to the world.

Consider a little girl, let’s call her Tammy, with a critical and shaming mother who throws negative epithets at every turn; for instance, calling the toddler stupid, idiot, clumsy, etc. These labels become engrained in Tammy’s psyche as truth. She becomes tentative, shy, anxious and risk averse.

Fast forward, Tammy is 8 years old and in the 3rd grade. The teacher asks the class a question and Tammy thinks that she knows the answer. Although tentatively, she raises her hand and is called on by the teacher and gives what she thinks is the correct response. Unfortunately, Tammy is wrong, and the class erupts in laughter. Tammy feels humiliated, ashamed and immediately, although unconsciously, her ego, in an effort to protect her in the future, resolves never to volunteer again and forms a belief that she must be right at all times while concurrently forming a deep-seated fear of being wrong.

Fast forward 30 years, Tammy has become a trader and even though she has had successes in her life, the beliefs that she formed early on, those internal psychic structures, are just as strong as ever. While in a trade, the price action edges toward her stop and immediately the belief that she must be right has been activated. This core, unconscious thought prompts a strong fear of being wrong along with the fear of loss which initiates another belief that she is not good enough. The fear and anxiety associated with these beliefs drives Tammy to choose to take an action that is not in her best interest; to move the stop. After moving the stop, Tammy feels temporary relief and hopes she has dodged that bullet even though her risk has been inappropriately increased. But, in a few moments, the realization that she has again violated her rules becomes clear. On the heels of not keeping her commitment to herself, she feels depressed and self-loathing because this has played out numerous times before. Additionally, she hears her mother’s familiar critical voice in her head again saying; “See, you’ll never win, and you’ll always be stupid.”

The above is just a brief snapshot of how traders become hijacked by limiting beliefs that cause debilitating emotions which drive bad choices and destructive behaviors. They are caught in a downward spiral of damaging acts, despite their attempts to self-correct. They read books, try exercises and promise themselves over and over that they will do better. Regrettably, until they challenge those limiting core beliefs, outcomes will remain the same.

You can begin to change core beliefs by treating them like a bad computer glitch. You would neutralize, uninstall and over-write the bad code by replacing it with a positive more productive counter-belief. By changing the conditions underlying how you choose and behave you can change your results. Like computer code, the beliefs that you harbor greatly influence your trade and your life.

One of the ways to approach re-writing the bad belief code is to use your journal and every time that you commit a rule violation ask, “What am I telling myself or believing to cause me to violate that rule.” Through self-reflection, pulling back the layers of the onion and introspection, you will soon identify the limiting beliefs that are motivating the bad behaviors. Once you have uncovered the faulty belief codes then ask:

“Is this true, is it absolutely true?” Invariably limiting beliefs cannot withstand this kind of scrutiny and you will have begun the neutralizing process.

After you have neutralized the limiting belief construct a counter-belief.

Subsequently, close your eyes and request from your unconscious a picture of the new belief/behavior.

Take this picture and change it by making it very bright, big, close, colorful, clear and put yourself in the picture while experiencing it through your eyes and hearing through your ears (this is called associating into the picture).

Then use the new belief as an affirmation while placing the image of the new belief/behavior on your internal movie screen.

Repeat this until the new belief/behavior feels congruent and natural to you.

There are a number of ways to deal with unwanted limiting, irrational and negative beliefs in order to stop them from directing your trading and life in ways that are antithetical to your conscious desires. The important thing is that you do the work in whatever intervention that will neutralize and uninstall the bad belief code. This is what we teach in Mastering the Mental Game online and on-location courses. Ask your Online Trading Academy representative for more information. Also, get my book, From Pain to Profit: Secrets of the Peak Performance Trader.

Disclaimer

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results.
Reprints allowed for private reading only, for all else, please obtain permission.